Capita Group said yesterday that a proposed partnership with North East Lincolnshire Council had been scrapped after final negotiations between the two sides broke down.

Councillor Andrew De Freitas said in a statement that a cabinet meeting on Monday decided the planned outsourcing deal with Capita, in which the firm was expected to overhaul the council's IT systems, should come to an end because "the deal was not right for council taxpayers".

A joint venture tie-in, which would have granted Capita more than 80 per cent of ownership with the council picking up just under 20 per cent, had been agreed in September this year. The final contract was expected to have been inked on 1 November.

Had the two parties reached an agreement, some 100 tech jobs in North East Lincolnshire would have been created. The council also reckoned the partnership would have been worth £175m, and would have lasted 12 years.

De Freitas told The Register that the council was "disappointed about the outcome". He said: "We will not stand still and 'Plan B' is already underway." But when asked what plan B was, he was unable to reveal any further details.

Talking about the Capita contract in September, deputy council leader Councillor Keith Brookes said: "Many aspects of community life will be positively affected by this important project."

Capita, which is the firm behind the London congestion charging system till IBM takes over in 2009, said in a separate statement: "Contract negotiations have been ongoing but the two parties have been unable to reach a mutually acceptable commercial agreement and, as a result, the partnership will not be going ahead." ®

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